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Stock market today: Slumping tech stocks and dashed hopes of quick rate cuts push Wall Street lower

NEW YORK (AP) 鈥 Wall Street fell to its worst loss in since September after Big Tech stocks got burned by the downside of high expectations and the Federal Reserve indicated cuts to interest rates likely aren鈥檛 imminent. The S&P 500 lost 1.
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Television screens on the floor of the New York Stock Exchange show the news conference of Federal Reserve Chair Jerome Powell, Wednesday, Jan. 31, 2024. The Fed kept its key rate unchanged at about 5.4%, a 22-year high. In a statement, it signaled a policy shift by dropping previous wording that had said it was still considering further rate hikes. (AP Photo/Richard Drew)

NEW YORK (AP) 鈥 Wall Street fell to its worst loss in since September after Big Tech stocks got burned by the downside of high expectations and the Federal Reserve indicated cuts to interest rates likely aren鈥檛 imminent. The S&P 500 lost 1.6% Wednesday. The Nasdaq composite fell 2.2%, and the Dow fell 0.8%. Alphabet was one of the market鈥檚 heaviest weights after analysts pointed to some concerning trends in how much it鈥檚 earning from advertising. Microsoft fell despite delivering stronger profit and revenue than expected. Fed Chair Jerome Powell said cuts to rates may be likely this year, but not as soon as traders hoped.

THIS IS A BREAKING NEWS UPDATE. AP鈥檚 earlier story follows below.

NEW YORK (AP) 鈥 Technology stocks are slumping Wednesday as several of Wall Street鈥檚 most influential stocks feel the downside of ultrahigh expectations. The market's losses accelerated after the cuts to interest rates that investors crave so much likely won't arrive in March, as many traders had hoped.

The S&P 500 was 1.3% lower in shaky afternoon trading and heading for its worst loss in six weeks. It veered between a loss of just 0.4% and 1.4% as traders revamped their bets for when the Fed would ease its main interest rate down from its highest level since 2001.

The Dow Jones Industrial Average was down 198 points, or 0.5%, as of 3:06 p.m. Eastern time, while the Nasdaq composite was 1.9% lower.

Alphabet was one of the heaviest weights on the market, and it fell 7% despite reporting stronger profit and revenue for the latest quarter than analysts expected. Underneath the surface, analysts pointed to some concerning trends in how much is earning from advertising.

The bigger challenge, though, may have been the high expectations the company is contending with after its stock soared last year by much more than the rest of the market. Other Big Tech stocks that likewise accounted for a disproportionate chunk of the S&P 500鈥檚 rally to a record were also struggling Wednesday in the face of high expectations.

was down 1.9% even though it delivered stronger profit and revenue than expected. One analyst, Dan Ives of Wedbush Securities, even called its quarterly report 鈥渁 masterpiece that should be hung in the Louvre.鈥

, another member of the group of stocks nicknamed the 鈥淢agnificent Seven,鈥 fell 1.4%. A judge in Delaware ruled a day earlier that its CEO, Elon Musk, is not entitled to the landmark compensation package awarded him by Tesla that鈥檚 potentially worth more than $55 billion.

The Magnificent Seven were responsible for the majority of the S&P 500鈥檚 return last year, and three more members are scheduled to report their latest quarter results on Thursday: Amazon, Apple and Meta Platforms. Expectations are high for them, too.

Advanced Micro Devices is not a member of the Magnificent Seven, but it benefits from many of the same trends. It fell 2.3% even though it matched analysts鈥 expectations for profit in the latest quarter and edged past them for revenue. Its forecast for revenue in the upcoming quarter fell short of analysts鈥 estimates.

Earlier in the day, stocks were getting some lift from easing yields in the bond market.

Lower yields can mean less pressure on the economy and financial system, while also encouraging investors to pay higher prices for stocks. They鈥檝e been generally dropping since autumn on expectations that a cooldown in inflation will push the Federal Reserve to cut interest rates several times this year.

The Fed on Wednesday left its main interest rate steady at its highest level since 2001. Perhaps disappointingly for investors, it also made clear that it 鈥渄oes not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward鈥 its goal of 2%.

鈥淲e鈥檙e not declaring victory at all," Fed Chair Jerome Powell said. He said it's unlikely Fed officials will get to that level of comfort by their next meeting in March. 鈥淚t's probably not the most likely case,鈥 he said.

But Powell also said officials at the central bank already have some confidence that day will arrive. They just need to see continued data confirming that inflation is heading sustainably lower. 鈥淲e have confidence,鈥 he said. 鈥淚t has been increasing, but we want to get greater confidence.鈥

Powell acknowledged the difficult position the Fed is in, with dangers arising from both acting too quickly and too late, even though 鈥渙verall it's a good picture鈥 for the economy at the moment. Cutting rates too soon could reignite inflationary pressures, while acting too late would mean unnecessary pain for the economy and job market.

Treasury yields in the bond market erased some of their losses from earlier in the day after the Fed made that statement, which forced traders to push out some bets that the Fed could begin cutting rates as soon as March.

鈥淕iven how strong the economy has been, the Fed probably figures it can err on the side of cutting later and slower than what the market is pricing,鈥 said Brian Jacobsen, chief economist at Annex Wealth Management. 鈥淐ome March the Fed might want to tee up a cut.鈥

The Fed made clear that it will watch incoming data reports to ensure inflation is sustainably moving down toward its goal. It may have found a couple reports from earlier Wednesday encouraging.

One report said that growth in was slower in the final three months of 2023 than economists expected. While all workers would like bigger raises, the cooler-than-expected data could help calm one of the Fed鈥檚 big fears: that too-big pay gains would trigger a vicious cycle that ends up keeping inflation high.

A separate report from the ADP Research Institute also suggested hiring by non-government employers was softer in January than economists expected. The Fed and Wall Street are hoping that the job market cools by just the right amount, enough to keep a lid on inflation but not so much that it causes a recession

The yield on the 10-year Treasury fell to 4.00% from 4.04% late Tuesday.

In stock markets abroad, indexes slumped sharply again in China amid continued worries about a weak economic recovery and troubles for the country鈥檚 heavily indebted property developers.

Stocks were mixed elsewhere in Asia and in Europe.

___

AP Writer Zimo Zhong contributed.

Stan Choe, The Associated Press